Student loans: The upper 1% goes nuts

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.


In “Five reasons why we should eliminate school loans” (May 16, 2013), we quoted Senator Elizabeth Warren, who wants to set student loan rates at the same level the big banks borrow from the Fed: a measly .75% (versus a gigantic 6.8% on student loans.)

This caused immediate outrage among the rich, who want the poor and middle classes punished as much as possible. (Rich kids don’t need student loans; it’s the poor and middle who pay)

Here are some quotes from Jason Delisle, Director of the Federal Education Budget Project at the New America Foundation:

With that mix of populist rhetoric and subterfuge, Senator Warren stands to whip up a mob of angry students (and pundits) who will demand that the government drop the interest rate on student loans to 0.75 percent. Good luck reasoning with a mob.

See the panic and outrage? Mr. Delisle practically foams at the mouth: “Populist rhetoric.” “Subterfuge.” “Whip up a mob.” OMG! Suggesting that students pay the same rate as banks?! How absolutely outrageous it is for the government to lower interest rates on student loans to the poor and middle income groups. Well, of all the nerve!

Remember now, the the federal government, being Monetarily Sovereign, doesn’t need to charge any interest on any lending. It has the unlimited ability to create dollars at will, so needs no income, and in fact, destroys the money upon receipt (i.e. all dollars paid to the federal government no longer are part of the money supply.)

Why then, does the federal government charge our college students any interest, much less a heartless 6.8%?

The 0.75 percent rate is actually a penalty rate, about three times higher than what banks charge each other in the market. Banks rarely use it, and lose money when they do.

Yes, if 0.75 is a penalty rate, how would one describe 6.7%?

. . . when the budget office “accounts more fully… for the cost of the risk the government takes on when issuing loans,” it reports that Subsidized Stafford loans – those made to low-income students – cost taxpayers $12 for every $100 lent out, or $3.5 billion per year. If the loans cost $3.5 billion a year when the government charges a 6.8 percent interest rate, cutting the rate to 0.75 percent would more than triple that cost.

Wrong on at least two counts:
1. In a Monetarily Sovereign nation, taxpayers do not pay for federal spending or for federal losses or for federal anything.
2. Anyway, how does the government lose 12% on every 6.8% loan? Simple. Default. The kids can’t afford to pay. Cutting the rate actually might cut the loss — but of course, that isn’t the point.

. . . the Department of Education estimates that 23 percent of the Subsidized Stafford loans it makes this year will default.

So the solution is to maintain high interest rates?? These kids, with no income, no jobs and little hope, are being squeezed by usurious rates, when in fact, they should not have to pay for college at all. Elementary school is free. High school is free. Why isn’t college free?

By their nature, students generally do not have collateral, earnings or credit histories. But when nearly a quarter of the loans are expected to default, charging a 6.8 percent interest rate is hardly the usury Senator Warren suggests. A non-profit credit union would charge at least double that rate.

Mr. Delisle is clueless about the purpose of student loans. It is to encourage and enable college education in America. Allowing more students the opportunity to attend college, benefits the nation.

This is not supposed to be a money-making scheme for the U.S. government. It is supposed to be a brainpower-building scheme for the United States.

But wait! Mr. Delisle does offer a solution, which I term, “Ruin Your Life”:

Let’s say Senator Warren is right that students are being crushed by debt.

“Let’s say”?? This is even a question?

Even so, lawmakers need not cut interest rates to alleviate that burden.

No, keep that rate high for the 99%.

A program available now, called Pay As You Earn, allows the same borrowers who would be eligible for Senator Warren’s proposal to have their annual loan payments set at between 0% and 10% of their incomes, depending on their earnings and family size.

That is, a borrower’s income – not the interest rate – dictates the payment, and it is always an affordable share of his income, never exceeding 10 percent annually. The program also guarantees that no one has to pay beyond 20 years. No matter how much a student borrows, or the interest rate, the loans are forgiven at that point.

Get it?. Pay for 20 years. Forget about buying a home. Forget about buying a car. Forget about investing in a business. Forget about paying for a family. Forget about your future. Your finances will be tied up for the next 20 years. What a plan! Guaranteed to widen the gap between the rich and the rest.

Senator Warren will not go away. But the mouthpieces for the 1%, will not go away, either. So expect the 1% to keep pounding at her. Heaven forbid the young people of the 99% are allowed a college education without the debilitation of massive debt.

The goal for the 1% is, as always, to widen the gap between the rich and the rest.

Thank you, Mr. Delisle, for the reminder.

Rodger Malcolm Mitchell
Monetary Sovereignty


Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone. Click here
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports


6 thoughts on “Student loans: The upper 1% goes nuts

  1. Maybe the Tea Fartists will have another rally with Glenn Beck to protest Senator Warren and her socialism.


  2. [1] Rodger writes: “Elementary school is free. High school is free. Why isn’t college free?”

    Actually they’re not free. They’re paid for by local taxes, usually property taxes. But Rodger’s question still stands. If they don’t charge tuition, then why should colleges? Colleges charged no tuition in some states until the mid-1960s.

    [2] For every media item that discusses the student loan debt crisis, there are a hundred media items that discuss the (non-existent) “federal debt crisis.” No American will ever have to pay a penny on the “national debt,” but student loan debt is real and severe. It can’t be discharged through bankruptcy. It’s a scam, supported by most politicians.

    Some sources say that if you have student loan debt, you can’t get Social Security. I’m not sure about that. I have a student loan debt from the 1980s totaling $5,100, which I never paid. With interest and penalties, the debt is now at $56,100. If I become disabled or incapacitated, with no Social Security and no income, I will kill myself (seriously). There’s a bridge over a canyon located forty minutes from me. That’s where I’ll do it.


  3. For Unpaid College Loans, Feds Dock Social Security

    . . . the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans.

    The amount that the government withholds varies widely, though it runs up to 15%. Assuming the average monthly Social Security benefit for a retired worker of $1,234, that could mean a monthly haircut of almost $190.

    Yet another reason why federal loans are bad fiscal policy. The federal government never should lend dollars: it only should give dollars.


  4. I read that the schools in Oklahoma did not have “safe rooms” because they didn’t have the money. What better use of Federal Govt funds than to build safe rooms in all schools in the Tornado alleys? Oh yeah, I forgot. the Federal Govt is broke.


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